EBay Wins Patent Ruling

Online auction giant eBay won the latest round in its
patent infringement fight with MercExchange Tuesday when the U.S. Patent
and Trademark Office handed down a ruling that could invalidate one of the
Virginia-based company's patents.

If the action is upheld it would invalidate the patent that led to a $25
million judgment against eBay.

MercExchange, a vendor of custom software for online auctions,
messaging and streamcasting, first sued eBay in November 2001 for allegedly
violating three of its patents. The suit revolves around eBay's "Buy It
Now" feature, which lets users pay through PayPal with a credit card or with
other PayPal funds.

The patent office ruled the patent to be invalid
because it claimed the inventions were either obvious or had been
anticipated by other patents, according to a statement posted on its Web
site.

"The patent office rulings have put a major cloud over MercExchanges's
key patents," Jay Monahan, eBay vice president of intellectual property,
said in a statement. "eBay has maintained all along that the patents
are not valid, and the patent office seems to agree."

As previously reported by internetnews.com, a federal jury ordered eBay to pay $35 million in damages after it found the company infringed on several
MercExchange patents.

However, in response to eBay's March 2004 request, the patent office
reexamined the patent and released its ruling Tuesday.

MercExchange will have a chance to appeal the ruling, which could spark another round of legal wrangling between the companies.

"We will deal with this office action, like all previous office actions
during the prosecution of our patents in the ordinary course," Thomas G.
Woolston, the owner of MercExchange, said in a statement.